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chapter7
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Indicate whether the statement is true or false.
1. Well-designed corporate ethics codes guarantee that employees will always make the ethical choice.
a.
True
b.
False
2. The five fundamentals of ethics education proposed by AACSB are: personal integrity, responsibility of
business in society, ethical decision making, ethical leadership, and corporate governance.
a.
True
b.
False
3. SOX requires that the CEO and the CFO of a publicly traded corporation must certify in each periodic report
containing financial statements that the report fully complies with the Securities Exchange Act of 1934 and that
the information fairly represents the company’s financial condition and results of operations.
a.
True
b.
False
4. Vivendi, a French-based multination corporation, gained international scorn when it was discovered they
cooked their books to make their performance appear better than it actually was for the purpose of making a
number of acquisitions.
a.
True
b.
False
5. Internal control procedures fit into two categories: (1) preventing accidental errors and intentional
misrepresentations and (2) identifying errors and irregularities after they occur so that corrective action may be
taken.
a.
True
b.
False
6. Enron Corporation is a perfect example of effective social and ethical responsibility in the financial sector.
a.
True
b.
False
7. Corporate social responsibility refers only to the company’s obligations to its stockholders and investors.
a.
True
b.
False
8. Production quality control and internal auditing are example of feedback controls.
a.
True
b.
False
9. In 2005, Bernie Ebbers of WorldCom was recognized by the Better Business Bureau for his company being a
leader in social responsibility.
a.
True
b.
False
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10. Under the terms of the Foreign Corrupt Practices Act, it is illegal to give a bribe to a foreign official or
foreign political party, but permissible to give a bribe to a businessperson if bribery is considered "an integral
part of doing business in the country's environment."
a.
True
b.
False
11. The Sarbanes-Oxley Act of 2002 set “green” standards for companies.
a.
True
b.
False
12. The global slave trade that exists today is referred to as human trafficking.
a.
True
b.
False
13. In the business world, the purpose of ethics is to direct business men and women to make as much money as
they can any way possible.
a.
True
b.
False
14. Corruption is unknown in countries with low CPI scores.
a.
True
b.
False
15. The four basic steps in ethical decision making are: define all the facts and circumstances, identify the
people affected, determine the alternative decisions and consequences, and make the decision and carry it out.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
16. The FIRST basic step in ethical decision-making is to
a.
identify who will be affected by the situation.
b.
determine how the decision will benefit you.
c.
define all the facts and circumstances.
d.
identify alternate decisions and consequences.
e.
carry out the decision.
17. Which of the following is NOT true regarding the Foreign Corrupt Practices Act?
a.
It was passed in 1952.
b.
It is a U.S. federal law that contains two parts.
c.
It has an anti-bribery provision.
d.
It has a requirement to maintain an adequate internal control system over financial records.
e.
A few people complain that the FCPA puts American firms at a disadvantage against non-U.S.
competitors.
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18. Do what is right, but filter the action by consideration of its consequences. Make a decision by considering
the consequences if everyone made the same choice under similar circumstances. These statements refer to the
_____ argument.
a.
libertarian
b.
religious
c.
universal
d.
ethical
e.
generalization
19. The Sarbanes-Oxley Act increased the potential prison sentence for fraud to _____ years.
a.
5
b.
10
c.
15
d.
25
e.
50
20. Asking oneself “Would I want others to treat me this way?” is an application of the principle of _____.
a.
consistency
b.
utilitarianism
c.
justice
d.
fairness
e.
respect
21. He perpetrated a financial scandal in the 1920s by using money received from later investors to provide
early investors with returns on their investment.
a.
Warren G. Harding
b.
Kenneth Lay
c.
Charles Ponzi
d.
Bernard Madoff
e.
Albert Fall
22. Which financial scandal was associated with the presidency of Warren G. Harding?
a.
the Edison Power scandal
b.
the Teapot Dome scandal
c.
the Vivendi scandal
d.
the Parmalat scandal
e.
the Enron scandal
23. Of the following, which is NOT true of the Enron financial scandal?
a.
It was a key event leading the U.S. Congress to pass the Sarbanes-Oxley Act of 2002.
b.
The scandal surprised no one because Enron was always regarded as an unethical company.
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c.
In 2000, corporate revenues exceeded $100 billion.
d.
The company’s former president, Jeffrey Skilling, led Enron to abuse an accounting practice known
as mark to market accounting.
e.
The truth about Enron was revealed in 2001.
24. Of the following statements about WorldCom, which is NOT true?
a.
It began in 1983 as Long Distance Discount Services, Inc.
b.
From 1999 to 2002, the company had manipulated earnings by using fraudulent accounting methods.
c.
Five techniques were used to cook the books.
d.
WorldCom filed for Chapter 11 bankruptcy in 2002.
e.
CEO Bernie Ebbers was sentenced to 25 years in prison.
25. A person of integrity has two essential characteristics: (1) knowledge about what morally constitutes the
right thing to do and (2) _____.
a.
follows the steps of ethical decision making
b.
the ability to solve an ethical dilemma
c.
the courage to do what is right
d.
the ability to evaluate goals and objectives
e.
the ability to think cognitively
26. The branch of philosophy that addresses the values pertaining to human behavior, with regard to the
“rightness” and “wrongness” of actions and to the “goodness” and “badness” of the intent and results of such
actions is called _____.
a.
ethics
b.
integrity
c.
values
d.
morals
e.
principles
27. Of the following, which is NOT a mandate that companies with corporate social responsibility strive to do?
a.
Provide a quality product or service to its customers
b.
Treat its employees with dignity and respect
c.
Do whatever it takes to be profitable
d.
Meet its legal obligations
e.
Fairly deal with suppliers
28. Computer crime became commonplace with the development of the world wide web in the
a.
1950s.
b.
1960s.
c.
1970s.
d.
1980s.
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e.
1990s.
29. To prepare business leaders for the 21st century, the Association to Advance Collegiate Schools of Business
suggests all but which of the following fundamentals of ethics education?
a.
Personal integrity
b.
Objectivist theory
c.
Ethical leadership
d.
Corporate governance
e.
Responsibility of business in society
30. The THIRD step of ethical decision-making is to _____.
a.
identify the alternative decisions and consequences
b.
make the decision
c.
define all the facts and circumstances
d.
identify the people affected by the situation
e.
determine that a decision needs to be made
31. Do what produces the greatest good. This statement refers to the _____ principle.
a.
essence
b.
governance
c.
imperative
d.
utilitarian
e.
generalization
32. Which of the following is NOT a value described in the BBB Code of Business Practices?
a.
Build trust
b.
Make the decision
c.
Define all the facts and circumstances
d.
Identify the people affected by the situation
e.
Determine that a decision needs to be made
33. The government can force an individual to sell his or her land so that a road can be built for the benefit of
the public as a whole. This is an example of the _____ principle.
a.
essence
b.
governance
c.
imperative
d.
utilitarian
e.
generalization
34. Internal auditing is an example of a(n) _____ control.
a.
feedforward
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b.
feedback
c.
vertical
d.
horizontal
e.
identical
35. The average computer crime has been estimated to cost almost
a.
$250.
b.
$2,500.
c.
$25,000.
d.
$200,000.
e.
$2,500,000.
36. The FINAL step of ethical decision-making is to _____.
a.
identify the alternative decisions and consequences
b.
make the decision
c.
define all the facts and circumstances
d.
identify the people affected by the situation
e.
determine that a decision needs to be made
37. The _____ is a report published each year by Transparency International, providing metrics to the potential
corruption risk for 174 countries.
a.
Corruption Perceptions Index
b.
Social Responsibility Report
c.
Ponzi Scheme
d.
Integrity Perceptions Report
e.
Ethical Violations Index
38. You can make an ethical choice by asking yourself all of the following questions EXCEPT
a.
"What's in it for me?"
b.
"What does the law say about this?"
c.
"What are company policies on this issue?"
d.
"Would I want my children to know I did this?"
e.
"Does the situation 'smell bad'?"
39. _____ is considered by many to be the most infamous financial scandal in United States history.
a.
Bank of America
b.
Enron
c.
Vivendi
d.
Parmalat
e.
Teapot Dome
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40. Internal control procedures fit into _____ categories.
a.
two
b.
three
c.
four
d.
five
e.
six
41. _____ refers to a system of rules and procedures designed to ensure the accuracy and reliability of financial
and accounting information.
a.
Internal controls
b.
External controls
c.
Environmental controls
d.
Global controls
e.
Legal controls
42. Which causes MOST problems associated with computer security?
a.
natural disasters
b.
government spying
c.
dishonest employees
d.
accidental errors
e.
disgruntled employees
43. A company’s obligations to society, including the welfare of people and places affected by company
activities is called _____.
a.
utilitarianism
b.
corporate social responsibility
c.
ethics
d.
integrity
e.
the moral imperative
44. Of the following statements, which is NOT true about ethics and integrity?
a.
A person of integrity has knowledge about what morally constitutes the right things to do.
b.
A person of integrity has the courage to do what is right.
c.
Ethical situations are always black and white.
d.
There are four basic steps in ethical decision making.
e.
An ethical dilemma occurs when one must make a choice among alternative actions and the right
choice is not absolutely clear.
45. Which is NOT an example of a preventive control?
a.
providing for the physical security of assets
b.
keeping adequate records
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c.
following written policies and procedures
d.
hiring competent and ethical employees
e.
production quality control
Enter the appropriate word(s) to complete the statement.
46. Briefly describe how a Ponzi scheme works.
47. The Foreign _______ Practices Act is a U.S. federal law that consists of two parts: an anti-bribery provision
and a requirement to maintain an adequate internal control system over financial books and records
48. Compare and contrast the two categories of internal control procedures.
49. Accounting practices that update the value of an asset to its current market levels are referred to as ______
accounting.
50. If you act according to absolute moral rules, you are following the ______ principle.
51. _________ are a system of rules and procedures within a business designed to ensure the accuracy and
reliability of financial and accounting information
52. ______ is the branch of philosophy that addresses the values pertaining to human behavior, with specific
regard to the “rightness” and “wrongness” of actions and to the “goodness” and “badness” of the intent and
results of such actions.
53. A type of fraud, in which money received from later investors is used to provide returns to earlier investors,
thus giving an appearance of a profitable investment is called a ______ scheme.
54. Electronic ______ is the exchange of goods or services using an electronic infrastructure.
55. Do you believe ethics can be taught? Why or why not? Explain your answer with specific examples.
56. Discuss the various ways to resolve an ethical question.
57. The Corruption ________ Index is a report published each year by Transparency International, providing
metrics to the potential corruption risk for 174 countries.
58. Briefly explain the relationship between ethics and integrity.
59. ________ refers to a company’s obligations to society, including the welfare of people and places affected
by company activities
60. Adherence to moral and ethical principles; soundness of moral character; and honesty demonstrates
_________.
Scenario – Bradley Corporation
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The Bradley Corporation manufactures packaged food items that are sold around the globe. Baby food is the
prominent product line currently produced by the corporation. Many of the customers for these products are
located in third world countries where infant nutrition is a serious problem.
Bradley has recently decided to change its internal management structure. New managers for the corporation
are now in place; however these new leaders do not appear to have the same value system as the former
leaders. The former leaders embraced the idea of product safety and exhibited integrity in the production of the
corporation’s product lines. While the new managers claim these are important to them also, it seems the
bottom line profit has precedent with them.
These changes have created concern in the company. There is strong disapproval for the way the company is
conducting its business at the present time. The Board of Directors for Bradley is facing the serious question of
whether profit is the only thing that matters now to the corporation.
61. There is a distinct difference in the value systems between the original and new managers of the Bradley
Corporation. All of the following except which one represents a key issue in ethics education, which if
reinforced to the new managers, could strengthen their current value systems?
a.
Reinforcement of corporate governance
b.
Reinforcement of ethical decision-making
c.
Identification of ethical leadership
d.
Recognition for the necessity of vast profits
e.
Fortifying information regarding the responsibility of business in society
62. The Bradley Corporation is faced with a decision that involves selling an outdated product such as baby
food to foreign markets to make a large profit versus losing money by destroying outdated products. Which of
the following best identifies what the Bradley Corporation is experiencing?
a.
A financial predicament
b.
An ineffective board
c.
The actions of a profitable business
d.
A matter for internal decision making
e.
An ethical dilemma
Scenario – GCD Industries
GCD Industries is a multinational organization that produces heavy equipment. It supplies many foreign
nations with the necessary equipment to conduct reconstruction after natural disasters. One of the company’s
largest sales resulted from the devastation that occurred in Japan after the tsunami hit that nation. GCD is
committed to helping nations recover from destruction brought about by natural phenomenon.
GCD prides itself on conducting its business in an honest and ethical manner. It does not wish to deal with
countries that engage in corrupt business practices, but realizes that all nations have differing business
practices. When the need arises for its products, this company strives to impart integrity into all of its business
deals with foreign nations regardless of that nation’s accepted practices.
63. GCD Industries attempts to always conduct its business in an ethical manner. It investigates the foreign
nations in which it operates so it will be aware of any upcoming business practice differences such as corruption
levels the company may face. Which one of the following is the most likely source of the information sought
by GCD Industries?
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a.
CPI
b.
WTO
c.
CSR
d.
WHO
e.
FCPA
64. GCD Industries acknowledges it is under the guidelines of the Foreign Corrupt Practices Act whenever it
has dealings in the foreign marketplace. Which one of the following is not addressed by this Act?
a.
Making the offer to pay money to a foreign official for special privilege afforded
to the company
b.
Establishing pay scales for employees of the company while working on foreign
soil
c.
Offering a gift to the head of the foreign political party of the nation where work is
being performed
d.
Making a promise of payment to government officials for directing business to the
company
e.
Provision indicating access to assets is allowed only by management’s specific
authorization
65. GCD Industries employs a set of internal controls within its operations to help ensure ethical behavior and to
help prevent financial impropriety. Which one of the following is least likely to be used as an internal control
by this company?
a.
Corrective actions are taken immediately whenever a department goes over its
budget
b.
Adequate and accurate documentation and records are maintained
c.
Financial and accounting records are periodically audited
d.
The company has written policies and procedures for all members to follow
e.
All funds due the company and all checks for expenditures are handled by the
same person
Scenario – Bradley Corporation
The Bradley Corporation manufactures packaged food items that are sold around the globe. Baby food is the
prominent product line currently produced by the corporation. Many of the customers for these products are
located in third world countries where infant nutrition is a serious problem.
Bradley has recently decided to change its internal management structure. New managers for the corporation
are now in place; however these new leaders do not appear to have the same value system as the former
leaders. The former leaders embraced the idea of product safety and exhibited integrity in the production of the
corporation’s product lines. While the new managers claim these are important to them also, it seems the
bottom line profit has precedent with them.
These changes have created concern in the company. There is strong disapproval for the way the company is
conducting its business at the present time. The Board of Directors for Bradley is facing the serious question of
whether profit is the only thing that matters now to the corporation.
66. Corporate social responsibility is defined as a company’s obligations to society, including the welfare of
people and places affected by the company’s activities. Which one of the following would not demonstrate the
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Bradley Corporation’s adherence to its corporate social responsibility?
a.
All Bradley employees regardless of their position have a say in new human
resource policies before they are implemented.
b.
The Bradley Corporation is engaged with green technologies to eliminate
potential environmental damage.
c.
The Bradley Corporation makes certain a significant return on investment is
provided to its stockholders regardless of what must be sacrificed.
d.
The corporation maintains a reputation for dealing fairly and honestly with its
suppliers.
e.
Bradley is known throughout the industry as a company that consistently meets
all of its financial and legal obligations.
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Answer Key
1. False
2. True
3. True
4. True
5. True
6. False
7. False
8. True
9. False
10. False
11. False
12. True
13. False
14. False
15. True
16. c
17. a
18. e
19. d
20. e
21. c
22. b
23. b
24. c
25. c
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26. a
27. c
28. e
29. b
30. a
31. d
32. b
33. d
34. b
35. d
36. b
37. a
38. a
39. b
40. a
41. a
42. d
43. b
44. c
45. e
46. Student answers will vary.
47. Corrupt
48. Student answers will vary.
49. mark to market
50. imperative
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51. Internal controls
52. Ethics
53. Ponzi
54. business
55. Student answers will vary.
56. Student answers will vary.
57. Perceptions
58. Student answers will vary.
59. Corporate social responsibility
60. integrity
61. d
62. e
63. a
64. b
65. e
66. c
